‘This Is a Trap,’ Says Investor About GameStop Stock

The surge of meme stocks stands as a testament to the transformative influence of the Internet age. Often, these stock price surges are detached from a company’s actual performance and tend to dwindle once the initial hype subsides.

GameStop (NYSE:GME) is the poster child of these wild rides up and subsequent crashes back to earth. Indeed, it was GME that spearheaded this phenomenon in 2020 and 2021, as individual investors, buoyed by stimulus checks, poured money into the company in hopes of capitalizing on a short squeeze that would push prices higher in the short run.

Now, Roaring Kitty – the nom de guerre of investor Keith Patrick Gill – has returned to the spotlight. Credited with fueling the 2021 meme surge, the internet personality sparked another buying spurt this week by disclosing a $115.7 million stake in GameStop stock. The market went berserk, with share prices nearly doubling at one point before settling with a 20% increase at the close of trading.

The fact that the current rally does not appear to be connected to the company’s fundamentals has not stopped numerous traders from buying into the frenzy. However, investor Oakoff Investments is urging caution in response to these developments.

“The biggest reason to avoid GameStop is its fundamentals, which continue to leave much to be desired,” says the investor, who adds that “the stock is overvalued relative to every metric we look at today.”

Roaring Kitty has been an investor in GameStop since 2019. As over one-fifth of all GME shares are being shorted, Oakoff thinks it highly likely that Roaring Kitty saw an opportunity to encourage another short squeeze to increase the value of his position.

Oakoff believes that we are seeing an “obvious manipulation,” one designed to engineer major profits. GME also has a history of issuing shares at these higher prices in order to raise cash for the company.

“I urge you not to fall into this trap by buying GME on this upswing. Instead, if you already hold GME stock in your speculative portfolio, I encourage you to consider exiting on this rip,” Oakoff summed up. To this end, Oakoff rates GameStop shares a Sell. (To watch Oakoff Investments’ track record, click here)

Wall Street analysts have not spent much time evaluating GameStop, with just one analyst rating the stock a Sell. (See GME stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.